Fund Outflows Hammer Re, Forwards Track Call

The spot rupee closed at an all-time low of 47.25/250 today against yesterday's closing of 47.18/1850 on the back of foreign portfolio outflows. Forward premiums went up tracking the high call rates.

The local currency opened weaker around 47.18 and weakened further to touch 47.2625 to strengthen a bit in the dying hours of the day at the close.

According to the dealers, foreign banks were the main buyers. "There was continuous outflow of foreign funds during the week, which pulled down the rupee against the dollar. But public sector banks gave some support to the domestic unit as it touched 47.2650 mark," a dealer with a private sector bank said.

According to a dealer with a foreign bank, however though the main demand was from foreign investors, there was demand form importers too. Dealers said most of the trades were done in the range of 47.24 to 47.26.

Forward premiums surged as call rates went up to touch the 7.50 per cent level. The six-month premium closed at 4.70 per cent as against 4.64 per cent yesterday and the one-year premium closed at 4.80 per cent compared with the previous close of 4.72 per cent.

"The possibility of a liquidity tightening because of the proposed Rs 7,000 crore twin auction on Monday cannot be ruled out. This coupled with a high call money rate today pushed up premiums," a dealer with a nationalised bank said.

The rupee is likely to go down further next weak and touch the 47.30 level. "It seems that the outflow of foreign funds is going to continue next week as well and hence the local currency may weaken further," a dealer said.

Forward premiums are likely to come down as dealers see call rates dipping next week. "We expect call rates to stay just above the seven per cent mark, hence forward premiums, too, should come down," a dealer with a foreign bank said.